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- JHM Group is an engineering solutions provider delivering customised solutions to the automotive, industrial, aerospace, medical devices and consumers sectors. The group is involved in the entire automotive LED lighting modules product development process – from conceptualising, designing, manufacturing to testing of the said modules which are then shipped to its customers who in turn supply to Tier One automotive manufacturers in the US.
- JHM’s core business focused on the automotive segment (LED), contributing >60% of group’s revenue. This includes Design, SMT production and assembly of automotive rear, interior and front headlamp lighting, inclusive of shifter control and turn signal indicator.
*New Development Catalysts*
- JHM secured four new clients this year, including Proton-Geely, and has a total automotive customer base of seven. Since the beginning of this year, JHM have been awarded four projects, and are bidding for another project consisting of 12 different components for car lighting worth about US$5m [RM21m] a year.
- a) Secured two new clients which are North America Lighting (largest auto lighting company globally) and Volvo Trucks (secured a US$1.3m (RM5.35m) order for 2021)
- b) In Oct 2020, JHM entered into a MOU with US-based company MASS Precision Inc to create an efficient and effective supply chain by setting up a JV company to support the semiconductor industry in Malaysia and the Asia Pacific region.
- c) By 3Q21, JHM will provide manufacturing support in supplying 5G and fibre optic parts to a United States company.
- d) In May 2021, JHM signed a contract with Skywooo to support assembly of components of Proton cars in Malaysia plus OEM business for the ASEAN Region market. The JV will be tasked to assemble audio, video and navigator (AVN) in the first phase with a target revenue stream of RM20m a year.
- e) In June 2021, JHM also entered into a technical collaboration agreement with Jiangsu Dekai Auto Parts to create an efficient and effective supply chain to support automotive lighting to Proton-Geely. Dekai is one of China’s Tier 1 (dealing directly with automotive OEM) players. Proton’s forecast is about 50,000 units a year for the Southeast Asian market, translating into lighting revenue of about RM100 million a year for JHM.
f) For the industrial segment, which involves the development of microelectronic components, JHM is looking to log US$45m a year in revenue over a 10-year period from its newly established, 75%-owned subsidiary Mace Hermetic Components Sdn Bhd.
g) JHM has plans to acquire one to two companies to further grow its industrial business, and the target companies have an annual net profit of RM10m.
h) JHM also plans to deepen its exposure in the EV space. Geely has a few EV models that are going to be introduced in Malaysia. JHM is looking forward to the battery pack for EV. JHM’s other EV-related moves include the design of LED lighting for autonomous EV trucks for a US customer.
*Investment Thesis*
- With the newly secured clients, potential incremental revenue is roughly about RM346m/year for JHM upon completion. That’s about 135% leap from 2019’s revenue base of RM256m.
- A few of these contracts are secured and will begin contributing to earnings from 3Q21 onwards, thus JHM’s earning base shall see meaningful growth in coming quarters. With Tesla’s market cap exceeding US$1trillion recently and global trend of transitioning into EV space, JHM is in a sweet position to grow its orderbook in future.
- If we conservatively assume net profit to grow by 100% in coming two years, although potential revenue growth is about 135% from 2019’s base and new contracts secured has higher margin than past products, JHM’s fair value should be about RM2.75 based on 25x forward PE.
Yutaka-EV will kill Proton and Produa, thousand of workers will jobless. Do u think government will push? But government will only allow EV assembly factory in Malaysia, but do u think Cars Company will build EV in Malaysia????
Green LT.. Lol.. why would EV kill Proton and Perodua.. it might damage O&G industry abit but it won't negatively affect automobile. Proton-Geely and Perodua will have to come up with electric car lineup to attract customers and boost sales
ev will not kill proton because geely owns proton now. in fact if government is pushing ev assembly factory in malaysia. Geely-proton will be the top beneficial. Which also means it is bullish for jhm since they r already in collaboration.
Green LT. lol..yea you're right. If oil and gas companies like Petronas makes a move against EV to maintain fossil fuel dominance, JHM still has customers outside of Malaysia. JHM main customers are outside Malaysia. And yes, Proton included since the monkeys sold it to Geely.
No Petronas, no tax. Malaysia to promote EV, wait long long. Many years ago, government not allow Electrical Motobike on the road, do u think Malaysia will allow EV? No benefit to Malaysia government, everything move with money in Malaysia.
2 cents from a newbie here: Solely based on the catalysts shared by Jack, even EV development in Malaysia is not as good as expected in the future, its just a tip of the iceberg (EV mentioned in 1 out of 7 catalysts) that might not affect the future revenue significantly of JHM. Obviously someone who criticised Malaysia government (although it is true) here didnt even look at the points shared by Jack and not giving even one constructive comment. I myself just discovered this company after Budget 2022 and hoping to take part in this journey at 1.80 level (if downtrend does not exist currently).
Open to opnions from all the veterans here if there is a better entry level other than 1.80 or my comment above. Thanks!